- US stocks were set to open lower after a stellar rally took them to all-time highs last week, knocked back as investors fretted about rising COVID cases and Donald Trump's possible impeachment.
- The dollar rose, driven by a degree of risk aversion and by rising bond yields and expected higher growth, which make the greenback more attractive to non-US investors.
- Asian and European stocks also slipped, as rising coronavirus cases caused traders to step back and reassess the recent rally.
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US stocks were set to open lower on Monday, while the dollar continued its mini-rally, as markets questioned record-high equity prices given a possible impeachment of President Donald Trump and rising coronavirus cases.
As investors cooled on stocks, they warmed to the dollar, a traditional safe-haven asset. It rose 0.22% against a basket of other currencies on Monday morning. That took the dollar index to 90.3, its highest in around two weeks, having fallen to a near-two year low of around 89.2 last week.
Some of the market jitters were due to the Democrats' preparations to impeach Trump for a second time, following his perceived incitement of a right-wing mob that stormed the Capitol building last week.
House speaker Nancy Pelosi wrote to colleagues on Sunday, saying: "The horror of the ongoing assault on our democracy perpetrated by this President is intensified and so is the immediate need for action."
Investors have shrugged off political worries in recent weeks, however, and instead looked ahead to the inauguration of Joe Biden and Democratic control of the Senate. Stocks have risen to record highs as traders bet on another big stimulus package.
But markets appeared to second-guess these record valuations on Monday. Rising coronavirus cases across the world, in some cases driven by new mutations, worried investors.
Gold was roughly flat at around $1,850 per ounce on Monday morning. But it was nonetheless trading at around a 3-week low, a victim of the bets on more stimulus and growth and rising yields.
Bitcoin had fallen about 14% over a 24-hour period to around $35,270 on Monday morning. The cryptocurrency dropped sharply over Sunday and Monday morning to as low as $32,400, having hit an all-time high of close to $42,000 on Friday.
Oil was also down as worries over coronavirus cases and political uncertainty caused some consternation. The global benchmark Brent oil price was off by 0.96% to $55.44 a barrel. The US benchmark WTI price was down 0.44% to $51.99 a barrel.
"Traders are worried about the global economy's weakness, which is triggered by the second coronavirus wave," said Naeem Aslam, chief market analyst at trading platform Avatrade.
Yet he added: "The current retracement that we see in the stock futures, especially in the US stock market, may not last for long. And this is because investors are still very much optimistic about more stimulus aid packages coming out of the US."
Analysts said the recent rise in US bond yields was helping the dollar move higher, with higher interest rates making dollar assets more attractive to non-US investors.
The yield on the US 10-year Treasury note, which moves inversely to its price, inched 0.2 basis points lower on Monday morning to 1.105%. This was nonetheless around its highest level since March 2020.
Arne Lohmann Rasmussen, chief analyst at Danske Bank, said in a note that investors have started to bet that the Federal Reserve would now raise interest rates sooner than previously anticipated.
"The market has now started to price in an earlier first rate hike from the Fed. It has cautiously been moved from early 2024 to early Q3 2023 … On Friday, the change in Fed pricing added support to USD," he said.